LGBTQ+ Retirement: 3 Questions That I’m Hearing

Today, there are more than 3 million LGBTQ+ Americans over the age of 50, and that number is expected to more than double in the coming decade.[1] Many of these people are the leaders of the LGBTQ+ community — individuals who took personal and professional risks to pave the way for the rights and opportunities that younger generations (like myself) enjoy today.

As members of this community, we will all face unique challenges in retirement. However, many of the financial planning resources that I come across speak to the younger generation, not those approaching or living in retirement. To create more dialogue around retirement planning within our community, I wanted to share three frequently asked questions that I’m hearing from my senior LGBTQ+ clients and colleagues, and my thoughts and perspective on each.

As always, these are my perspectives based on my own experience, and they may differ from your own experience.

Questions #1: Is it necessary to formalize an estate plan if I don’t have kids?

In my opinion, the answer to this question is: absolutely, especially if you are not married.

An estate plan is your opportunity to define the friends, family members, or charitable organizations that you’d like to receive your wealth when you are no longer here. And this statement holds true for everyone, regardless of whether kids are in the picture. Just as important, an estate plan allows you to define two critical roles: your successor trustee and the people whom you’d like to grant powers of attorney.

  • Successor Trustee: This is the person who is responsible for carrying out the wishes detailed within your estate plan. If you don’t define a successor trustee, these powers could default to someone that you don’t have a strong relationship with.
  • Powers of Attorney: This legal document gives specific individuals the power to make critical decisions surrounding your health and financial well-being if you cannot make those decisions on your own. Keep in mind that you can name different people for different POAs, and these POA agreements can be broad in scope (a general POA) or related to just one aspect of your life (a financial POA or medical POA, for example).

Defining these two roles is critical for anyone. Even if you’re married, you will still need to formalize these powers through legal documents. A spouse does not automatically receive rights to power of attorney or successor trustee.

Lastly, for those who are charitably inclined, estate planning allows you to consider how your wealth can support philanthropic causes while reducing your estate tax burden. As it relates to estate planning, this is typically achieved by defining a dollar amount that should go to charitable organizations at the time of your passing. In this way, you can support a cause that is important to you while reducing the taxable value of your estate.

Question #2: I’ll care for my aging parents, but who will care for me?

For a person turning 65 today, there is a 70% chance that they will need some type of long-term care during their lifetime.[2] Unfortunately, this is an uncomfortable reality for many members of our community, since discrimination at long-term care facilities remains an issue. In a study of 60 long-term care communities, just 18% were found to be fully LGBTQ+ inclusive[3], and more than 60% of LGBTQ+ adults say they are worried a long-term care facility may not provide them adequate care based on their sexual orientation or gender identity.[4]

While none of this is good news, there are things we can do to find the care that we need and deserve. In my view, the opportunities are in research and financial planning.

  • Research: Just this year, SAGE and the Human Rights Campaign Foundation announced their Long-Term Care Equality Index. When completed, this index will be a nationwide scorecard that grades care facilities across four key categories: foundational policies & practices, resident services & support, employee benefits & policies, resident & community engagement. Fundamentally, this information will help us make more informed decisions about where we (or loved ones) receive senior care.
  • Financial Planning: The second opportunity lies in long-term care planning. For most of our clients, this involves assuming that long-term care will be needed at some point in the future and then modeling how the cost of that care will impact their net worth and cash flow. With this information in hand, we can then help people “self-insure” by building savings toward long-term care needs or even ear-marking assets specifically for this cost.

Another option to explore is long-term care insurance. We do run into the challenge of cost for this coverage, as the insurance premiums can be quite steep. If you are considering the cost of long-term care, we can help you crunch the numbers and determine which path forward makes the most sense. Ultimately, the goal of all this planning is to define a course of action (and financing) that allows you to receive the best care possible.

Question #3: Are there any retirement benefits to getting married?

I have several friends and colleagues within the LGBTQ+ community that have been together for 10, 20, or 30 years. In 2015, many were presented with the option to get married. While there are tangible benefits to getting married, it’s natural to feel hesitant about marriage if you’ve been with your partner for decades. Things have worked great so far, so why change the partnership dynamic now?

As I shared in a previous article, getting married for financial reasons alone rarely makes sense, and only you and your partner can choose the right path. With that said, I do feel it is valuable to map out the financial pros and cons of each path — getting married and not getting married — and use this information as just one more factor in your decision-making process.

From the perspective of retirement planning, the “pros” that immediately come to mind relate to Social Security spousal benefits, surviving spouse pension benefits, and estate taxes.

  • Social Security spousal benefits

If you have significantly higher Social Security benefits than your spouse, your spouse may apply for spousal benefits. These spousal benefits can be up to half of your “primary insurance amount,” but this application is only available to married couples.

  • Surviving spouse pension benefits

If you have a pension, getting married could make financial sense. When you file for your pension, you will get to decide how the payments are structured. Most companies provide the ability to choose between a single-life annuity (no benefits for your spouse after your passing) or survivorship options (your spouse continues to get a benefit, sometimes 50% or 75% of the total amount, after you have passed away). Like Social Security spousal benefits, these survivorship options are only available to married couples.

  • Estate Taxes

For married when the first spouse passes away, it is possible that all of their assets could be transferred to the remaining spouse — free of estate taxes. This is called a marital deduction and there is no limit to this deduction.

If the financial benefits of getting married are compelling, but you aren’t ready to completely commingle your assets with your partner, you could consider a prenuptial agreement. This agreement can allow you to capture the benefits of marriage, but it also defines what assets are being blended together and what assets will remain yours. This strategy isn’t right for everyone, but I wanted to mention it as an available option.

Closing Thoughts

I hope this article has shed some light on three frequently asked questions that I’m hearing from senior colleagues in the LGBTQ+ community and my thoughts and perspective on each one. If you have questions about your own retirement plan, or want to share your perspective on these topics, it would be great to connect.

[1] Forbes, The Gay Retirement Guide for Fabulous LGBTQ Financial Planning (here)

[2] U.S. Department of Health & Human Services, How Much Care Will You Need? (here)

[3] SAGE, Long-Term Care Equality Index 2021 (here)

[4] McKnights, LGBT Americans Worry about getting into, living in long-term care (here)

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